State v. Public Utility Com'n of Texas
344 S.W.3d 349
| Tex. | 2011Background
- Texas overhauled PURA in 1999 to create a fully competitive electric industry, requiring split into generation, retail, and transmission/distribution units.
- Nonbypassable charges, including the competition transition charge (CTC), were to recover stranded costs using a market-valuation framework under PURA §39.262, with market value defined by unaffiliated third-party transactions and several valuation methods.
- Following the 2002 rate freeze, CenterPoint and affiliates filed a true-up under §39.262 to reconcile stranded costs and other true-up balances; the PUC used multiple valuation methods, including an extra-statutory approach, pending remand.
- CenterPoint entered into the July 21, 2004 Transaction Agreement to sell Genco (generation assets) to private buyers; the sale closed after the true-up order, with prices higher than some valuation estimates.
- The court below largely upheld the PUC but remanded to apply the sale-of-assets valuation method and consider NBV adjustments related to the RRI option and depreciation, leading to the Texas Supreme Court decision.
- On review, the Texas Supreme Court held the sale-of-assets method must be used to determine market value; affirmed some aspects of the PUC’s approach and remanded for further proceedings consistent with the decision.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Which market-value method governs stranded costs | CenterPoint argued PSV method; PSV reflects spin-off sale value with control premium. | PUC argued PSV or hybrid methods; transaction data could justify non-statutory data points. | Sale-of-assets method obbligatory; remand for market value via sale. |
| Whether EMCs paid to RERS are deductible from NBV | Intervenors urged deduction of EMCs paid to RERS from NBV. | PUC maintained EMCs should not alter stranded-cost calculation; NBV adjustments limited to 39.252(d). | EMCs paid to RERS should not be deducted; NBV not reduced on that basis. |
| Adjustment to NBV for the RRI Option | If PSV or other method used, NBV should reflect the RRI option. | PUC argued adjustments limited under 39.252(d); alternative holdings considered. | Issue moot; PSV rejected; no NBV adjustment for RRI when sale-of-assets method used. |
| Depreciation double-recovery risk in NBV | Depreciation for 2002-2003 should be offset to prevent double recovery. | Both stranded costs and capacity-auction true-up exist; depreciation not duplicative under statute. | Statutory definition freezes NBV as of 2001; no NBV adjustment to reflect post-2001 depreciation; reject double-recovery rationale. |
| Capacity auction true-up methodology | Goins proposed blending capacity auction prices with private-auction data to avoid bias. | Statute requires using the capacity auction price per 39.262(d)(2) and Rule 25.263(i). | Use the statutory capacity auction price; reject Goins’ blended approach. |
Key Cases Cited
- City of Corpus Christi v. Pub. Util. Comm'n, 51 S.W.3d 231 (Tex. 2001) (market-value framework for PURA; regulatory context)
- In re TXU Elec. Co., 67 S.W.3d 130 (Tex. 2001) (ECOM model background; stranded costs)
- CenterPoint Energy, 143 S.W.3d 81 (Tex. 2004), 143 S.W.3d 81 (Tex. 2004) (EMCs and NBV treatment under PURA Chapter 39)
- Texas Industrial Energy Consumers v. CenterPoint Energy Houston Electric, LLC, 324 S.W.3d 95 (Tex. 2010) (carrying costs on true-up balances; INTERPRETATION of Rule 25.263)
- CenterPoint Energy Houston Electric, LLC v. Pub. Util. Comm'n, 252 S.W.3d 1 (Tex. 2011) (primary holding—sale-of-assets method on remand; NBV/RRI discussion)
- City of Rockwall v. Hughes, 246 S.W.3d 621 (Tex. 2008) (statutory interpretation; Chevron-esque reasoning)